Rush if you want to park money in a fixed deposit that offers the highest rate. This is because banks, barring the odd one, will end special deposit schemes from April 1.
Special deposit schemes offer a higher rate than normal schemes. Union Bank of India, for example, is offering 9.15 per cent for a 1,100-day deposit, 40 basis points more than on deposits of other maturities.
Most banks are giving higher rates for select deposit schemes, having tenures like 444 days, 500 days, 1,000 days, and so on. Union Bank, Bank of Baroda and Central Bank of India are among banks that may discontinue these schemes from April 1.
“We are likely to withdraw special schemes like the 1,100-day one as we have already got a very good response. The purpose has been met. However, we will keep interest rates on term deposits attractive and in line with the market rates,” said a senior official of Union Bank of India. The Mumbai-based bank collected Rs 10,000-12,000 crore through its special schemes.
| SPECIAL INTEREST | ||
| Bank | Interest rates offered on | |
| Central Bank of India | 9.60% (555 days) | |
| Indian Bank | 9.50% (555 days) | |
| Bank of Baroda | 9.35% (444 days) | |
| ICICI Bank | 9.25% (590 days) | 9.25% (990 days) |
| Bank of India | 9.25% (555 days) | 8.25% (1111 days) |
| State Bank of India | 9.25% (555 days) | 9.25% (1000 days) |
| Canara Bank | 9.10% (555 days) | 9.10% (1000 days) |
| Punjab National Bank | 9.05% (555 days) | 9.25% (1111 days) |
| Dena Bank | 9.00% (1000 days) | |
| Union Bank of India | 8.10% (500 days) | 9.15% (1100 days) |
| Source: Banks | ||
“The scheme (special deposit) was extended till March 31 and we have not yet decided whether it will be continued beyond March. We have to review and see if our targets have been met. It will also depend on the strategy for the next financial year,” said a senior Central Bank of India official.
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Banks launched these schemes during the last six months as credit growth was outpacing deposit mobilisation. As a result, banks were facing the prospect of widening asset-liability gap.
Following a series of rate hikes, deposit growth has picked up and come close to the Reserve Bank of India’s (RBI’s) projection of 18 per cent. According to latest RBI data, deposits grew 16.4 per cent on year till February-end, while advances grew 23 per cent.
Most banks now say deposit rates have peaked. Banks are unlikely to raise rates further due to the fear of pressure on margins.
“I don’t think it is possible for banks to continue these special deposits schemes at high rates. If not in April, I think all these schemes will be withdrawn by June 30,” said D L Rawal, chairman and managing director, Dena Bank.